Jurisdiction(s):
United Kingdom

Related legal acts

Key definition

Cluster definition

What does Cluster mean? Cluster (or cluster policy) describes an insurance product, commonly a life assurance investment bond, that is issued as a bundle of separate, usually identical, policies (segments) under one plan. Each segment is a standalone contract with its own rights and can be surrendered, assigned or encashed independently. The term is descriptive market practice rather than a defined statutory label, but it is recognised in the UK chargeable events regime and HMRC guidance, and in Irish Revenue practice; case law (for example, Lobler v HMRC) highlights the tax consequences of partial surrenders and assignments. Key legal features and usage include:...

UK income tax and chargeable event gains on offshore bonds and foreign policies: segmented policies, personal portfolio bonds, remittance basis, temporary non-residence, legacy policies, HMRC reporting

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Practice notes

The Offshore bonds and other foreign policies Practice Note sets out what constitutes an offshore bond and a foreign policy, and outlines the potential tax liabilities. It also focuses on several niche topics: Cluster policies (also called segmented policies), personal portfolio bonds (PPBs), the treatment of certain legacy policies, and how the foreign policy regime dovetails with the Remittance basis and temporary non-residence provisions...

Cluster (or segmented) policies

In place of one insurance contract, certain providers supply a bundle of policies to a holder—commonly called a ‘cluster’ or ‘umbrella’ of smaller segments. Each policy, or segment, stands as a separate insurance contract. At inception every segment is the same. They may carry an identical base number with a suffix; for example, XP234567/1–100, where 1–100 denote the discrete segments. A single policy document may cover the whole cluster. UK insurers generally can offer clustered arrangements, and offshore bonds are often marketed in this way, though not every product has this feature...

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Web page updated on 22/05/2026

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